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Just one week after QCash published this blog post on the damaging effects predatory payday lenders have had on citizens in the state of New Mexico, we are updating this post to report that the New Mexico state legislature has just passed House Bill 132, which will reduce the maximum annual interest rate for installment loans from 175 percent to just 36 percent throughout the state.

“This legislation addresses an important issue that affects the most vulnerable New Mexicans in both rural and urban communities,” said New Mexico’s Governor Michelle Lujan Grisham.

Critical figures who contributed in getting the bill passed included Juan Fernandez, president and CEO of the Credit Union Association of New Mexico. A steadying influence during debates on the bill, Fernandez informed legislators that credit unions can and have been making emergency loans at no more than 28 percent APR. New Mexico state representative Susan Herrera worked for four years to get the bill across the finish line. The public policy organization Think Mexico was also central in helping get the bill passed. They outperformed an army of lobbyists and former legislators representing the predatory payday lending storefronts.

Like much of America these past two years, life in New Mexico has been socially, financially, and economically challenging. Tens of thousands lost their jobs or were furloughed, while many others lost their businesses they had dedicated their lives to building. 

In the course of these last two years, those same workers and business owners were scrambling to take care of their sick or dying loved ones, or staying home with their children when classrooms went virtual. During the most formidable societal and economic threat of our lifetimes, New Mexicans still knew to turn to their local credit unions for financial help (and no doubt some emotional relief!) 

In the effort to assist members in preserving their livelihoods, the majority of the state’s credit union organizations came to the rescue by providing advances to federal employees while offering hard working households affordable small dollar loans. 

Nusenda Credit Union in Albuquerque is one such example. By May 2021, Nusenda’s Co-Op Capital micro-loan program helped the credit union make 630 micro-loans worth a total of $1.8 million on behalf of their community. Not only that, but Nusenda worked with local restaurants to provide 15,097 meals to first responders, front-line staff, and neighbors in need. People helping people, indeed.

While healthy credit union-backed small dollar lending programs assisted many of New Mexico’s members and consumers, the sudden wave of the COVID-19 pandemic only exacerbated the effects of the rot that afflicts the financial services industry: predatory payday lending. “Access to up to two triple-digit interest rate credit is like giving a starving person poisoned food,” said New Mexico Senator Katy Duhigg, following the passing of a state Senate bill in March 2021 capping APRs at 36 percent. “It doesn’t actually help them and it actually makes things a lot worse.”

According to an article in the Las Cruces Sun News, state representative Susan Herrera claimed 600,000 small dollar loans were taken out in the state in 2019, months prior to the pandemic. After the pandemic’s spread in 2020, the demand only increased. Despite predatory payday lenders’ claims they would run out of business and deny residents a money-lending option, Herrera said the lenders continued to operate, even after having numerous violations filed against them, including physically preventing people from leaving their homes in an effort to collect money.

Photo: Sandia Mountains, Albuquerque, New Mexico | Denise Wymore

Finding realistic solutions to countering New Mexico’s high interest rates

History has demonstrated time and again that widespread economic and financial instability and market crises advance an increase in “opportunistic” or even predatory business practices that prey on the more desperate, vulnerable, and financially-underserved populations. That is why the Credit Union Association of New Mexico wanted to work with regulatory officials and agencies to create equal and fair regulations that protect consumers by prohibiting unreasonably high-interest small dollar loans.

Throughout the pandemic, far too many consumers in New Mexico were compelled to take out high-interest payday loans in order to survive these extraordinary times. The APRs on such loans fluctuate in various amounts, but far too many of the state’s consumers pay up to an incredible 175 percent interest rate, all-too-often incorporating hidden arrangements that charge the consumer added fees.

Fortunately, New Mexico’s credit unions have spent generations proudly assisting and guiding their communities with pride through the worst of economic times. From one corner of the state to another, the credit union movement spent these last two years providing courageous members and workers two times the number of total small dollar loans than they did in 2019, with overall loan growth reaching 6.6 percent by the third quarter of 2021. 

While Credit Union Association of New Mexico president and CEO Juan E. Fernandez Ceballo is proud to guide members during these challenging times, he knows the state’s organizations need help. “While a number of laws have been put in place in neighboring states to protect consumers and regulate the high fees and interest rates and interest rates of payday loans, New Mexico has done little to protect citizens.

“We’re calling on the Legislature to broker an agreement for sound consumer protections within the next 12 months. As Governor Michelle Lujan Grisham works with legislatures to implement policies that will improve the lives of New Mexicans, we look forward to working collaboratively to put families first.”